With apologies to The Beatles, it was 20 years ago today (give or take a few months) that a small team on Microsoft’s campus in Redmond, Wash., launched a little product called Expedia.com, designed to bring transparency to the world of travel booking.
Today, that product has morphed into Expedia Inc., an industry behemoth with about a dozen brands, more than $6.6 billion in revenue (2015) and a market cap of more than $17 billion. And as company executives told Tnooz yesterday at their Bellevue, Wash., headquarters, they’re not planning on slowing down anytime soon.
Said chief executive Dara Khosrowshahi:
“Twenty years ago, no one would’ve predicted that well over 50% of the travel booked in the U.S. was going to be online. And no one would’ve predicted that the two largest travel companies in the world would be online players [i.e., Expedia Inc. and Priceline Group].”
At Expedia, size clearly matters, which, in turn, drives every aspect of corporate strategy. On the front end, it explains the company’s commitment to maintaining individual brands, even after acquiring Orbitz, Travelocity and HomeAway last year.
Said Khosrowshahi:
“The bigger you get as a company, the slower you [tend to] get. So we actually break ourselves up into multiple brands so they can innovate on their own.”
Case in point: Despite being acquired last year, Travelocity is defining itself with its own features.
It in the process of rolling out what it calls its Customer 1st Guarantee (aka C1G), which allows guests facing service issues to reach out to the company via Facebook and Twitter and soon via Facebook Messenger on the Travelocity app and the mobile web.
According to John Morrey, vice president and general manager of Expedia and Travelocity, U.S. and Canada, the goal is to engage with the guest within 30 minutes and resolve any issue within 24 hours, while also providing a clear differentiator for the brand.
Said Morrey:
“There may be best practices — the idea of having ‘super agents’ who can handle escalations — that we could potentially leverage behind the scenes to help the company portfolio but this is a customer service differentiator for Travelocity.”
Along similar lines, Alice, the provider of a platform that enables a hotel to manage guest requests efficiently (which Expedia invested in late last year), is currently exclusive to Expedia.com.
Meanwhile, the company is going in the opposite direction on the back-end, investing heavily to bring as many brands as possible onto a single technology platform.
Initially implemented for Expedia.com, the company recently moved Orbitz and CheapTickets to the new “tech stack” and is in the process of moving ebookers there, as well. Migrations of Orbitz for Business to Egencia and the partner networks for Orbitz and Travelocity are also in the pipeline.
Such efforts don’t come cheap. According to Morrey, the company spent $830 million on technology last year, plus another $3.4 billion in marketing spend.
But they’re expected to yield significant cost-savings in the short-term and what Mark Okerstrom, CFO and executive vice president operations, called “steady-state growth” in the long-term:
“We feel good about the steady-state growth pattern after synergy realization is flowed through. As online travel becomes a bigger portion of the travel industry, and as the law of large numbers takes hold, the growth rates [of online businesses] will eventually approach that of the larger travel industry. But that’s a long ways away.”
In the meantime, he calculates overall industry growth at 5–7% per year, with online growth at an unspecified “multiples of that.”
The company is also playing the long game with other current initiatives, such as Accelerator, its algorithm-based system that allows hotels to get better visibility (for a fee) based on the quality of their offer, a proprietary quality score and commission paid.
While the product has produced a drag on Expedia’s revenue-per-room-night, Okerstrom isn’t worried, especially since the accompanying lowering of standard commission rates makes the company’s network more accessible to more properties.
And, ultimately, more properties on more company-owned sites is the goal, whether it’s the addition of vacation rentals via HomeAway or the incorporation of apartments and other urban spaces into Expedia and Hotels.com.
Scale, it seems, has its privileges.
Or, as Khosrowshahi said,
“We want to be everywhere and offer up everything. When I look at the categories we’re engaged in, we’re in good shape. You could argue that we’re strategically complete; we’re just not strategically big enough yet.”
NB: Image from Expedia HQ by Rob Lovitt.